August 30, 2005
Daniel Duchovny
Office of Mergers and Acquisitions
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0303
Re: Inland Monthly Income Fund II, L.P., Schedule TO-T filed August 2, 2005 by
MacKenzie Patterson Fuller, Inc. and its affiliates, the Purchasers
SEC File No. 5-80895
Dear Mr. Duchovny:
Thank you for your letter dated August 12, 2005 regarding our recent Schedule
TO-T. I will respond to the questions you asked in your letter in the order in
which you posed them.
1. Financial statements of the purchasers would not add material
disclosure to the available information. As disclosed, the offer
will be funded through the existing capital of the purchasers. As
stated in the offer materials, the purchasers have aggregate capital
which is more than adequate to fund the offer. The specific facts
and circumstances of this offer should be understood. Absent a
tender offer filed under Section 14(d)(1) of the Securities Exchange
Act, the purchasers would have little or no access to the security
holders and the holders would have little or no access to potential
purchasers. Because of the lack of liquidity of the securities, the
uncertainty as to the underlying value of the securities and the
issuer's assets, and the extraordinary per unit costs of using a
tender offer as the means for purchasing the securities, the offer
prices are substantially discounted from the estimates of
liquidation value of the issuers. It is therefore anticipated that
only those securities holders who have an immediate need for
liquidity will seek to sell their securities. Based on the extensive
past experience of both the purchasers and others who have tendered
for illiquid securities in similar circumstances, the purchasers do
not reasonably expect to receive more than 10% to 25% of the total
number of securities sought and will likely receive substantially
less than that. Of course, the purchasers could have tendered for
100% and would not have expected any different response, but such a
tender would have been unrealistic. Accordingly, while the
purchasers are prepared and able to fund the entire offer, as a
practical matter, the actual funds necessary to complete the offer
are reasonably expected to be substantially less than the cash
reserves held by the purchasers. This offer is for immediate cash
payment and no securities of the bidder are to be used. No
evaluation of securities or credit risk is therefore relevant to
this offer. The bidder neither seeks control, nor would it, if
successful in purchasing all securities sought, gain control of any
issuer, so no evaluation of the bidders' financial condition is
relevant in that respect. No market exists for the securities and no
competing bidder is seeking to purchase the securities, so no real
alternative opportunities are available to be evaluated over the
period of the offer. Given the circumstances and terms of this
offer, to require inclusion of financial statements for this offer
would involve unnecessary and unreasonable time, effort, and
expense, without providing any more material information to
prospective sellers than the information presented in the Offer. Any
additional document preparation, financial statement preparation,
and subsequent mailing costs would add substantial additional cost
to the offer without any material impact on disclosure. Based on the
foregoing, we
August 30, 2005
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believe the financial statements presented together with disclosure
of the other sources of funds provide all financial information
material to a security holder's evaluation of the offer. We not only
disclose that we will finance the Offer with cash on hand, we also
disclose the amount of cash on hand that we have to finance the
Offer as well as the fact that we have sufficient cash on hand to
finance all other outstanding offers.
Furthermore, we note that a tender offer for limited partnership
differs substantially from a tender offer for shares of a
corporation in that a large ownership of stock in a corporation can
result in effective control, whereas the same is not true for a
limited partnership. A 20% stockholder in a public corporation might
be able to influence the make-up if not the decisions of the board
of directors, and therefore of the company, but a 20% limited
partner has no control over the management of the partnership
whatsoever. In fact, by state law, a limited partner CANNOT have
control over the day-to-day management of the Partnership or the
limited partner loses limited liability. The only way a limited
partner can influence the Partnership is by replacing the general
partner, which usually requires a majority vote (as opposed to
plurality for boards of directors), and often the replacement of a
general partner is subject to other restrictions. Thus, the
threshold for when a bidder in a tender offer for limited
partnership units is tendering for a sufficient number of units such
that those deciding whether to tender might find the bidder's
financial statements material must be higher (at least 50%, I would
argue, assuming, for the sake of argument, they were material at all
in such a case). This offer is for only 23.95% of the Units.
2. We agree that all conditions must be satisfied or waived prior to
expiration and that we cannot accept securities prior to expiration.
Nonetheless, the depository has signed letters of transmittal prior
to expiration, hence the disclosure.
3. Section 5 of the Offer on page 14 states that "If the Purchasers
make a material change in the terms of the Offer or the information
concerning the Offer or waive a material condition of the Offer, the
Purchasers will extend the Offer to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act." As to an
immaterial change, it is a matter of logic and law that it would
have to made prior to termination of the Offer. Nevertheless, we
will make this clear.
4. The protections are too numerous to describe in detail and are not
material to an investor's decision as to whether or not to tender.
However, we have described the material protections--the requirement
that the Partnership provide audited financials. We do not believe
any of the other protections are material to this decision; we have
provided this additional disclosure in response to prior comments.
5. Thank you for pointing out the new address.
6. See the Form 8-K filed by the Partnership on May 19, 2005. The
Partnership disclosed that it would distribute this amount to the
limited partners.
7. As discussed in our correspondence relating to Angeles Partners XII,
it is not a condition to the Offer any more than actually tendering
shares would be. I.e., if a tendering unit holder does not own any
units, they will not be paid for the units. SEC guidance has
recognized that limited partnership tender offers may delay payment
until confirmation of ownership; that is all this is doing. Once
again, as I mentioned in the Angeles Partners XII correspondence,
for
August 30, 2005
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reference to this guidance please see "Commission Guidance on
Mini-Tender Offers and Limited Partnership Tender Offers," Release
No. 34-43069, July 24, 2000, Section II(D).
8. It should have been October 1, 2005 in both locations. This has been
corrected in the revised materials.
9. Reviewing the definition, it would appear that you are commenting
that we should not define business day with respect to Pacific Time
but should use Eastern Time. Given that our Offer expires at
midnight Pacific Time, it made sense to define "business day" with
respect to Pacific Time. If we extend the Offer, we have to keep it
open for another ten business days. If we defined "business day"
with respect to Eastern Time, we'd be extending the Offer from
midnight Pacific Time to midnight Eastern Time 10 business days
later, which would be less than 10 full business days. Furthermore,
the definition is modified with respect to announcements of
extensions of the Offer such that the press release is issued by 9
a.m. Eastern Time. Moreover, it does not appear that withdrawal
rights are dependent upon this definition.
10. The Section begins "The Purchasers do not believe the provisions of
the Partnership Agreement should restrict transfers of Units
pursuant to the Offer" (emphasis added). Thus, it is a belief. We do
not know how many units will have been submitted for transfer in the
12-month period prior to when we submit any units pursuant to this
Offer, so we cannot say whether or not the Partnership Agreement
will restrict their transfer. However, we believe it is unlikely
because there have been no other tender offers, so it is unlikely
there have been many transfers. In any case, it is immaterial to the
investor, as we explain, because we will pay upon confirmation of
ownership.
11. We would not have a controlling voting interest because in limited
partnerships a majority of all units outstanding is required as
opposed to a majority of units voting. Of course, as mentioned
above, it is nearly impossible that we will ever get that kind of
response from a tender offer, so our position will actually be much
smaller.
12. We do not believe the conditions are so broad as to make the Offer
illusory or unclear. We do confirm our understanding of the staff's
position that we must immediately advise Unit holders as to how we
intend to proceed if we believe an event implicates a condition;
thus, unit holders do not need to be able to determine whether a
condition has been triggered because we will advise them. Further,
the cross references are fairly specific (there is only one
"Introduction" and only one "Summary Term Sheet").
13. This is our standard allocation scheme; given that no Purchasers own
Units, that preference will have no effect. We will delete it.
Closing paragraphs: While acknowledging the Staff's positions, and without
implying any specific issue with such position, we respectfully decline to make
the statements requested. There is no requirement that we do so. To the extent
the requested statements are accurate statements of applicable law, there is no
reason to obtain from bidders a recitation of such law. To the extent the
statements go beyond applicable law or reflect interpretations of law that may
be open to dispute, it would not be fair or appropriate to require bidders to
make statements that might prejudice their right to take a contrary position at
some later time, if the occasion arose.
Please let me know if you have any questions or further comments.
August 30, 2005
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Very Truly Yours,
/s/ Chip Patterson
Chip Patterson
Vice President and General Counsel
(925) 631-9100 ext. 206
(925) 871-4046 (Fax)
chip@mpfi.com